Bevscape: Business

Jumping from one multinational beverage company to its fiercest rival, Rockstar energy drink signed a distribution agreement with PepsiCo Inc. that will end its deal with The Coca-Cola Company.

PepsiCo spokesman Larry Jabbonsky said the deal will more than double PepsiCo’s share of the energy category, and he expects Rockstar to mesh well with other PepsiCo energy offerings: Amp, No Fear and coffee drinks co-marketed with Starbucks.

The agreement, slated to last for 10 years, will put the product in Pepsi’s core three distributors: Pepsi Bottling Group, PepsiAmericas and Pepsi Bottling Ventures. Their territories cover nearly 80 percent of the U.S. and Canada, and Jabbonsky said discussions with independent Pepsi bottlers are currently under way.

Rockstar’s deal with Pepsi follows the recent introduction of Monster into the Coca-Cola system. Rockstar had signed a distribution agreement with Coca-Cola Enterprises in 2005, and renegotiated the deal last year as Coke courted Monster-parent Hansen Natural. The renewed deal, which extended through the end of 2009, allowed Rockstar to cancel the agreement with 30 days’ notice.

Following that agreement, Rockstar found itself in the precarious position of possibly sharing trucks with a unique competitor. Both Rockstar and Monster claim to have come up with many of the energy drink category’s strongest innovations, including their now-ubiquitous 16 oz. cans, juice blends and coffee energy drinks.

As a result, the company was known to be actively seeking new deals, speaking with Dr Pepper Snapple Group and Anheuser-Busch’s 9th Street Beverages before reaching a deal with Pepsi.

Both Rockstar and Pepsi expect the switch from CCE to the Pepsi system to occur this spring or summer – possibly in April. Rockstar spokesman Jason May said he expected Pepsi’s involvement to strengthen the brand’s position on the shelves.

Another Rockstar representative said the new deal taught his firm a lesson: beverage firms interested in getting their product into a major beverage company’s distribution systems should deal with that company, not its distributors. Rockstar joined CCE at a time when that distributor actively sought non-Coke brands to expand its portfolio, forcing the parent company’s hand at a time when it was developing its Full Throttle energy drink. The arrangement, according to the representative, left Rockstar working distributor by distributor within the Coke system, and as a result, he said, the brand suffered from spotty coverage. With PepsiCo handling its bottlers, he expects Rockstar’s coverage to be more consistent.

McDISCONTINUED PEPSI TEST

PepsiCo’s foothold in the world’s largest restaurant chain disappeared last month, when McDonald’s announced that it would end sales tests of bottled Pepsi products.

The fast-food chain, a long-time Coca-Cola stronghold, had been testing sales of bottled PepsiCo staples, such as Mountain Dew and Gatorade, in cold boxes in select locations. McDonald’s spokeswoman Dayna Proud said those products will not make the jump to the chain’s national beverage strategy.

PepsiCo spokesman Larry Jabbonsky said the two companies mutually decided to end the test last summer after PepsiCo discovered that the opportunity in McDonald’s cold cases was smaller than expected.

The cold-case plan, still ongoing, coincides with McDonald’s attempts to bolster its softdrink sales and draw in consumers who would normally buy their beverages at convenience stores. Proud said further tests, which have included Red Bull and vitaminwater, would continue.

Coca-Cola spokesman Ray Crockett said the company was pleased with McDonald’s decision.

SWEET TRADEMARK BATTLE

It started as a trademark suit, and ended as a potential partnership. Clayton Christopher, founder and CEO of Sweet Leaf Tea, had unknowingly built his now-national iced tea brand on a name dangerously similar to that of a Wisdom Natural Brands stevia-derived sweetener.

The name of the sweetener? SweetLeaf.

Wisdom CEO Jim May, who started using the SweetLeaf name in 1994, sent a cease and desist letter to Sweet Leaf Tea last May. Christopher responded by suing Wisdom, but the case sounded like a formality from the start.

“Both parties are optimistic that we will be able to work everything out,” Christopher told the Austin Business Journal in June.

The companies announced last month in a joint press release that they had worked out their differences, and May said he expected to see his product in one of Christopher’s products sometime soon.